Oct. 9 (Bloomberg) -- Abdullah al-Luhaymi spends weekend
nights cruising around the Saudi capital Riyadh on his motorbike
before stopping to meet friends, usually at an American-style
fast-food joint. Each month he has more to choose from.

“This is where we like to eat and watch people, this is
the best area in Riyadh,” the 29 year-old university graduate
says, sitting on his green and black Kawasaki. He’s parked
outside Dunkin Donuts and just down the road from Applebee’s,
Elevation Burger and Krispy Kreme. People wait in lines to be
served, as SUVs arrive outside delivering more diners.

The crowds in eateries and stores are a sign that Saudi
Arabia’s consumers are getting a bigger share of its oil wealth.
King Abdullah, seeking to ward off political unrest, spent an
extra $60 billion on jobs, housing and salaries last year,
creating a retail boom in the world’s top crude exporter. The
result is the region’s “most compelling economic story,”
according to HSBC Holdings Plc.

Growth is attracting investors. Carlyle Group LP in
December bought a 42 percent stake in Saudi company Alamar
Foods, which operates Dominos and Wendy’s restaurants as well as
a food processing plant which supplies them. The index of Saudi
retail stocks is up almost three times as much as the national
benchmark in the past year.

“Sales have been going up dramatically in the past two
years,” led by the government “pumping money into the
economy,” said Crispin Hawes, an analyst at the New York-based
Eurasia Group, which monitors political risk.

Creating Jobs

Largely unscathed by last year’s Arab uprisings, the $600
billion Saudi economy will expand 6 percent this year, according
to the International Monetary Fund. The country’s population is
forecast to rise to 50 million by 2030 from 28 million,
according to the Economist Intelligence Unit.

Retail sales are up 20 percent in 2012, “and that’s off
quite a high base from last year, because you had the salaries
and everything up,” said James Reeve, an economist at Riyadh-based Samba Financial Group.

The expanding youth population has made job-creation a
priority for the king. The retail industry has been targeted as
a relatively easy way to create employment, Hawes said. Saudi
Arabia introduced new rules favoring local hires, and has also
loosened restrictions to allow women to work in lingerie and
cosmetic outlets.

Shopping malls and restaurants have particular appeal in a
culture that bars movie theaters, alcohol and other leisure
pursuits because of Islamic prohibitions.

No Entertainment

“People in Saudi Arabia don’t have an entertainment sector
compared with any other country,” said Yasser Almisfer,
managing director of Riyadh-based Silkroad Hospitality, which
runs hotels and serviced apartments. “Ask any family, young or
old, what they do for entertainment and they’ll give you two
options: either go to a mall, or go out for food.”

Almisfer and Hawes both point to the impact of tens of
thousands of Saudis who have studied in the U.S. or Europe.

“We can expect returnees over time to have a broader
impact on taste,” accelerating the spread of western-style
consumption preferences, Hawes said. Often it’s Saudi students
who spot an opportunity while abroad and negotiate the local
franchise, Almisfer said.

Carlyle, explaining its acquisition in the kingdom, said
its “young population is well travelled and exposed to a
variety of cuisines and eating habits.”

Oil Risk

The government’s spending spree creates risks for an
economy dependent on energy prices, and needs to be
“contained,” the International Monetary Fund warned last
month. “Vulnerability to a sustained drop in oil prices has
increased, the fund said, pointing out that such a decline did
happen in the 1980s and 1990s.

There’s also the risk of inflation, which exceeded 11
percent in 2008 as economic growth accelerated.

For now, companies are moving to take advantage of the
boom. Almarai Co., the largest food producer by market value,
said in May it may raise as much as 1.3 billion riyals ($347
million) by selling Islamic bonds to finance capacity growth and
make acquisitions.

Inside Elevation Burger, customers line up 10 deep for the
organic burgers.

Saudis have “great interest in American brands,” Hans
Hess, founder and chief executive of the restaurant chain, based
in Falls Church, Virginia, said in an e-mailed response to
questions. He said the company makes “several times our
domestic averages” at its Saudi restaurants, and plans to open
as many as 15 branches in the kingdom.

Two likely regulars are Mohammed Ibrahim, 18, and his twin
brother Hamid, students at King Saud University. Mohammed,
dressed in a traditional white robe, says he prefers fast food
to typical local dishes such as lamb and rice.

“My brother and I are the same,” Mohammed said. “We love
American food.”